POWER May 2017 - 30

DISTRIBUTED GENERATION
Should Investor-Owned Utilities
Be Worried About Community
Choice Aggregation?
Courtesy: Frontier Renewables
Community choice aggregation (CCA) is only allowed in seven states currently, but
recent developments in California have investor-owned utilities there worried. They
fear losing up to 80% of their retail load. Could the changes in California ultimately
serve as a model for other communities seeking CCA and what does that mean for
the future of traditional power utilities? The answers could be unnerving.
Bentham Paulos
A
new wave of competition is coming to
California, threatening to steal up to
80% of retail sales from the three big
investor-owned utilities (IOUs). In a joint filing
in late January, Pacific Gas and Electric
Co. (PG&E), Southern California Edison,
and San Diego Gas & Electric Co. (SDG&E)
said that community choice aggregation
(CCA) could cause huge amounts of " load
defection. " Without the proper exit fees, the
utilities are worried they could suffer big financial
losses.
A CCA is like the Costco of energy-a
buyers' club where local government agencies
buy power on behalf of their residents.
Five CCAs already serve California customers,
and many of the state's biggest cities are
phasing in CCA plans. In April, San Francisco,
San Mateo County, and parts of Santa
Clara County-two counties south of San
Francisco-will begin serving hundreds of
thousands of new CCA customers.
CCA has had mixed results around the
country. California's experience, so far, has
been very different from other states. Illinois,
especially, was the center of CCA activity
in 2014, with as many as 70% of residential
customers served by aggregations. But aggregation
seems to have had its day there, as
numbers have shrunk in the face of maturing
30
competitive markets.
Cost a Driver in Illinois
The CCA movement began in Massachusetts
in 1997. It has been authorized in seven
states, typically as part of a move toward
competitive markets. In many of the states,
it has been a bit player, but it has been a major
force in Illinois. The Land of Lincoln had
742 communities approve municipal aggregation
by citizen votes, according to the Illinois
Commerce Commission. But CCA's
brief moment in the sun may be waning, according
to Mark Pruitt, former head of the Illinois
Power Authority and now a prominent
consultant on CCA.
Illinois' deregulation deal in 2007 resulted
in a transitional period when default utility
rates were frozen for six years to allow retail
marketers to get started. The 2008 recession
knocked down demand and market prices
to well below the fixed prices from utilities.
CCA was authorized through legislation
in 2010, and a wave of aggregation swept
through communities eager to save money.
" It was a cost savings opportunity, and it
was guaranteed, " said Pruitt. " Aggregators
could get 30% below the fixed price. "
Total bill savings peaked in 2013 (Figure
1), when CCA customers saved $258 million
www.powermag.com
compared to ComEd's default rate, according
to data from the Illinois Commerce Commission.
But that year, ComEd's and Ameren's
fixed price contracts started expiring,
and their rates fell closer to market prices.
They shifted to short-term contracts at prices
similar to competitive energy suppliers. As
a result, CCAs were no longer able to save
money. CCA customers in ComEd's territory
actually spent $188 million more than the default
rate during the past two years.
As of June 2016, 114 communities had
ended their programs or put them on hiatus.
The most notable change was in Chicago-
the biggest CCA in Illinois (and the country).
It started serving 750,000 homes and small
businesses in 2013, or about two million people.
But savings dried up in 2015, and most
went back to ComEd.
Pruitt expects more residential load to migrate
from CCAs back to utilities. " Most of
them are very explicit: 'We're only getting
into this to save money,' " he said. " Is it bad
that they are getting out? If their goal is to
save money and they can't do that, then they
have served their purpose. "
Javier Barrios, managing partner with
Good Energy, disagrees. Good Energy advises
200 CCA communities in Illinois. He
points out that CCA numbers are dropping
POWER | May 2017
http://www.powermag.com
POWER May 2017

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